eDekka Gets Decked by Finding of Exceptional Case in the Eastern District of Texas

Plaintiff eDekka LLC (“eDekka”) sued a large number of defendants in Eastern District of Texas alleging infringement of U.S. Patent No. 6,266,674 (“the ‘674 Patent”) titled “Random Access Information Retrieval Utilizing User Defined Labels.” As explained by the district court, the ‘674 Patent relates to storing and labeling information and discloses a preferred embodiment that includes a cassette tape recorder with multiple buttons, a microphone, and a speaker. The majority of eDekka’s suits stemming from the ‘674 Patent target online retailers that offer a shopping cart feature on their e-commerce websites. It is this shopping cart functionality that eDekka alleges infringes the ‘674 Patent.

Numerous defendants filed motions to dismiss under 35 U.S.C. § 101, contending that the ‘674 Patent was directed to unpatentable subject matter under Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014). The district court granted defendants’ motions and held that the claims of the ‘674 Patent were patent-ineligible under § 101. Defendants then filed a motion asking the district court to find the cases “exceptional” under 35 U.S.C. § 285.
The Defendants asserted that the case should be found “exceptional” under § 285 for two reasons: (1) eDekka’s case was objectively unreasonable; and (2) eDekka litigated in an unreasonable manner.

Turning to the first point, the district court found that eDekka’s § 101 position was objectively unreasonable by reviewing the claim terms and referencing the arguments that were made at the hearing on the motion to dismiss. The district court noted that the ‘674 Patent is “demonstrably weak on its face, despite the initial presumptions created when this patent was issued by the PTO. The ‘674 Patent generically refers to a ‘data structure,’ but does not require such structure to be limited to a computer. The claims are not tied to a generic computer, let alone a specialized one. Claim 1 essentially describes the common process of receiving, labeling, and storing information, while Claim 3 encompasses retrieving such information.”

Despite the weakness of the claims, the district court found that “rather than acknowledging the inherent weaknesses of the ‘674 Patent, eDekka proffered completely untenable arguments to the Court throughout the § 101 briefing process and at the September 10, 2015 hearing. For example, eDekka asserted that the patented claims ‘improve the functioning of technology’ by reducing ‘the time to retrieve information and the amount of information that must be retrieved.'” The district court found “absolutely no basis in the claim language to support eDekka’s newfound position that the ‘674 Patent was meant to serve as a teaching tool for computer users.”

The district court also found that eDekka litigated in an unreasonable manner. The district court noted that “eDekka’s litigation history in this District–which includes filing strikingly similar lawsuits against over 200 defendants–reflects an aggressive strategy that avoids testing its case on the merits and instead aims for early settlements falling at or below the cost of defense. Based upon the record of the above-captioned cases, as well as the Court’s in camera review of eDekka’s ‘674 Patent settlements to date, the Court finds a pattern of defendants that agreed to settlements at relatively early points in the litigation for amounts significantly below the cost of taking a patent case to trial. Further, on September 8, 2015, just two days before the September 10, 2015 § 101 hearing, counsel for eDekka contacted numerous defendants with offers to settle their cases for three-thousand dollars each. These offers represent extraordinarily low amounts.”

As a result, the district court found “it is reasonable to conclude that eDekka acted with the goal of “exploiting the high cost to defend complex litigation” to extract “nuisance value settlement[s]” from defendants. See Eon-Net v. Flagstar Bancorp, 653 F.3d 1314, 1326-27 (Fed. Cir. 2011) (affirming the district court’s finding of an “indicia of extortion” where a plaintiff filed over 100 lawsuits and “[e]ach complaint was followed by a ‘demand for a quick settlement at a price far lower than the cost of litigation . . . .'” (citation omitted)). Such tactics contribute significantly to the Court’s finding that this case is “exceptional.” See id. at 1328 (“[T]he appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith.”).

Stan Gibson, an experienced technology and IP trial lawyer, represents inventors, manufacturers, owners and others in litigation centering on complicated technology. Stan's practice is national in scope and he represents both plaintiffs and defendants and has litigated dozens of cases on behalf of his clients, taking many of them to trial. Although most cases settle, Stan's ability to take cases to trial enhances their value and drives favorable verdicts and settlements. Contact him at 310.201.3548 or SGibson@jmbm.com.

Greg Cordrey, an experienced patent litigator and former flight test engineer, represents a wide range of industries including medical device, computer, e-commerce, semiconductor, automotive, aircraft, and consumer products. He has litigated patent cases nationwide and has practiced before the Federal Circuit and the U.S. Patent and Trademark office as a registered patent attorney with experience in concurrent litigation and patent reexamination proceedings. Greg is recognized as one of the "Best Lawyers in America" in IP Law, as well as a "Super Lawyer" and "Rising Star." Contact him at 949.623.7236 or GCordrey@jmbm.com.

Rod Berman is recognized by the Daily Journal as one of the top 30 intellectual property attorneys in the State of California, and by the Los Angeles Business Journal as one of the top 100 attorneys in Los Angeles. Rod's practice focuses on patent, trademark, copyright, unfair competition and internet responsibilities and includes counseling, litigation, opinions, licensing and prosecution. In addition to being a registered patent attorney, Rod is a court-recognized expert in patent and trademark law, and has successfully argued before the Federal Circuit. Contact Rod at 310.201.3517 or RBerman@jmbm.com.

Andrew Shadoff, is a litigation associate who has assisted in prosecuting and defending patent infringement lawsuits involving mechanical devices. He has drafted successful summary judgment motions and pretrial motions in limine, and has assisted with trial and witness preparation. Contact him at 310.712.6856 or AShadoff@jmbm.com.

Joe Mellema's practice focuses on litigation in federal and state courts, including the protection and enforcement of intellectual property rights, and business and commercial disputes. He has handled patent, trademark, copyright, trade secret, unfair business practices, antitrust, and business and commercial lawsuits in all phases of litigation and arbitration. In addition to a law degree, he has dual degrees in electrical engineering and physical sciences, and was formerly a systems engineer at Raytheon Company. Contact him at 949.623.7232 or at JMellema@jmbm.com.

Rachel Capoccia

Rachel Capoccia focuses on technology-based litigation and counseling, with an emphasis on patent litigation, copyright litigation and other technology-related matters. Her legal experience is complemented by 10 years working at IBM as a software engineer before law school, during which she led a team of engineers who developed computer graphics software and computer aided design systems. She represents clients in all phases of patent infringement matters involving diverse areas of technology. Contact Rachel at 310.201.3521 or RCapoccia@jmbm.com.

Jessica Newman is a litigation associate, and a member of JMBM's Patent Litigation Group. She is involved in all aspects of litigation and has assisted in representing clients in a variety of industries with regards to patent infringement and copyright infringement issues. Contact her at 310.785.5372 or JNewman@jmbm.com.